Chinese Premier Li Keqiang (李克強) sought to reassure jittery global investors that Beijing was ready to support the cooling economy, saying the government had the necessary policies in place and would push ahead with infrastructure investment.
Recent weak economic data and mounting signs of financial risks have dimmed outlook for the world’s second-largest economy, sparking talk of imminent government action or even a mini-stimulus plan to shore up growth.
“They don’t want investors and businesses to lose confidence. So obviously they want to make it clear they have the ability to step in if necessary. So I think that’s probably the main point behind it,” said Julian Evans-Pritchard, China economist at Capital Economics in Singapore.
In a speech to a meeting in China’s northeast made on Wednesday and reported by the Xinhua news agency early yesterday, Li said government has policies well prepared and would roll out targeted measures step by step to aid the economy.
“We have gathered experience from successfully battling the economic downturn last year and we have policies in store to counter economic volatility for this year,” the premier said.
“We will launch relevant and forceful measures according to what we have planned in our government work report,” he said, referring to his report to the National People’s Congress earlier this month.
Among those measures are speeding up construction of basic infrastructure, including railways, highways and water conservation projects in the central and western provinces, as well as boosting trade and cutting companies’ financing costs.
“The overall performance in the economy so far this year is relatively stable and we saw some positive changes, but we cannot neglect the increasing downward pressure and difficulties,” Li said.
China’s exports unexpectedly tumbled last month and other economic data and business sentiment surveys have consistently undershot expectations, suggesting the economy’s first quarter performance was the weakest in five years.
Adding to market jitters are signs of financial strain — China’s first ever bond default earlier this month, a bankruptcy of a small property developer and a run on small rural banks in one of the coastal provinces earlier this week.
While isolated and of limited scale, the events feed into growing sense of unease about risks stemming from a combination of a rapid rise in corporate debt and slowing economy.
However, the premier said the economy was robust enough to fend off potential risks.
“We must also note that China’s economy has quite strong tenacity and large wiggle room,” he said.
Market reaction to Li’s comments was muted, with only Hong Kong shares ticking up.
“The market reaction really hasn’t been that great as these comments have been said many times before,” said Du Changchun (杜長春), an analyst at Northeast Securities (東北證券) in Shanghai.
“No matter whether you look at industry performance or economic data, things aren’t looking too optimistic. So even if he [Li] says this, unless we see some positive policies the market will not go up too much,” Du said.
China has set a GDP growth target of around 7.5 percent for this year, which some economists said could be too ambitious after a likely weak first quarter.
Other analysts said it is not easy for Beijing to turn on the stimulus taps, given an already acute overcapacity problem in some industries and the current government focus on putting structural reforms ahead of growth.